Chancellor Rachel Reeves vowed not to increase tax or borrowing on the scale seen in last week’s Autumn Budget when questioned by the Treasury Select Committee yesterday (6 November).
Reeves raised an extra £40bn in revenue for the government through tax rises and announced a £70bn increase in spending on public services and infrastructure in her first Budget.
But measures as bold as these will not be needed again, she told the Committee yesterday, stating that the government have “drawn a line under the chaos and instability of the last few years”.
See also: Autumn Budget 2024: Ten key takeaways
“We’ve drawn under that now,” Reeves said. “There’s been a reset that means our public finances are now on a firm footing and the trajectory of public spending is much more honest.
“So we’re never going to have to do a Budget like this again. This was a once in a Parliament reset so that we start on the right foot.”
Gilt yields rose in the wake of Reeve’s sizable Budget – although AJ Bell investment director Russ Mould said they have everywhere, suggesting there is “a wider issue at work” globally – so she reassured the Committee that such sizable tax hikes will not be repeated.
See also: Autumn Budget 2024: Capital gains tax hiked to 24% in ‘blow for investors’
“In terms of whether we’ll be doing something similar in the future – no,” Reeves said. “This was a Budget of reset.
“We’re not going to be coming back with more tax increases, or indeed more borrowing. We now need to live within the means we’ve set ourselves in the budget and those allocations of spending totals.”
Could Trump derail Reeve’s growth plan?
Reeve’s also unveiled the Office for Budget Responsibility (OBR) latest forecasts during last week’s Budget, which predict positive economic growth over the next few years, including a 2% increase to GDP in 2025, and another 1.8% in 2026.
But the election of Trump could spoil these figures, according to the National Institute of Economic and Social Research (NIESR), who said his 10% tariff on all US imports could halve UK GDP.
Reeves said she would negotiate with Trump ahead of his inauguration next year and was “confident those trade flows will continue under the new president,” but members of the Committee questioned whether it was “realistic to influence a president who is so set on a course that is so well defined”.
See also: How will Trump’s tariffs impact markets?
Reeves responded: “I think it is too early to start making changes to forecasts for our economy because of the election of a president in the United States, but I would say this – our trading relationship and economic relationship with the United States is absolutely crucial.
“The US are our single biggest trading partner. Trade between our two countries is around £311bn a year, so of course our relationship is crucial and our special relationship obviously goes much beyond trade for our security and defense.”
Industry spokespeople such as IBOSS CIO Chris Metcalfe said Trump’s isolationist levies against the rest of the globe could lead to a trade war that “further dismantles the globalization narrative,” but Reeves said she will do all she can to convince the new president of the importance of free trade.
“We’re not just a passive actor in this. It’s a trade relationship with the United States and we will make strong representations about the importance of free and open trade not just between ourselves and the United States, but globally,” Reeves added.
“I am optimistic about our ability to shape the global economic agenda as we have under successive government.”
